To attract FDIs Bangladesh needs to make extra efforts

To attract FDIs Bangladesh needs to make extra efforts

Md. Joynal Abdin

The Financial Express on April 16, 2010

Transnational Companies (TNCs) and Multinational Companies (MNCs) are the main engines of globalisation. The TNCs and MNCs are masterminds of trade liberalisations around the world. Foreign direct investment (FDI) is a result of the global expansions of TNCs and MNCs. But recent global financial crisis made international area more competitive; as a result, profit of these global giants has fallen to a considerable level. Investors are rethinking to expand new avenues and reduce expenditures to avoid any further downturn. As a result, FDI dropped 39 per cent globally in 2009 compared with that in 2008.

Though the global FDI fell in 2009, a new wave of FDI has hit the developing countries and LDCs as a result of the crisis. The financial crisis has made thebusiness environment more competitive amid a fall in consumption. Production cost has risen in the developed countries. TNCs and MNCs seeking to reduce the production cost are relocating their industries in mostly LDCs, which are enjoying some special facilities in case of duty free market access. As a result, investors are keen to avail of these special facilities by exporting products from an LDC country. All these factors are advancing FDI flows to LDCs and developing countries.

Similarly, least developed countries have a thrust to attract FDI to increase GDP growth, ensure higher employment rate, upgrading infrastructure facilities, ensure technology transfer, acquire managerial know-how and increase labour productivity.

Bangladesh government is working hard to attract more FDI. But do we have sufficient preparation to attract FDI on a massive scale? Statistics shows that Bangladesh received USD 1.09 billion in FDI in last fiscal year, which is 63 per cent greater than the previous fiscal year. It indicates that we are getting increasing amount of FDI, but if we compare our position on FDI with the neighboring countries the picture will be clear. During the period India got FDI worth USD 41.56 billion, even an unstable country like Pakistan attracted FDI of USD 5.4 billion. 

Our government is working to attract FDI, but the policy it is pursuing is not sufficient. The government should have proper policy framework, infrastructure development and investment promotion to attract FDI. 
Under policy framework, we are offering some facilities to the foreign investors like tax holiday up to 12 years, allowing 100 per cent foreign ownership, permanent residentship for foreign nationals investing more than US $75000 or equivalent amount, concessionary financial benefits similar to the local investors, wide range of tax exemptions, facilities for repatriation of invested capital, profits and dividends, multiple entry visa facilities, reinvestment of reportable dividend treated as new investment, etc. 
But the country heavily lags others in infrastructure development. The country faces a nagging energy crisis. There is huge shortfall in power and gas supplies. The government must take up a crash programme to improve the supply of gas and electricity, which are vital to run the industries, and improve the condition at ports and transportations for the sake of higher FDI flow.
The country has also little effort in promotional activities. There were investment promotion exhibitions or road shows organised lately. But there is still no encouraging move coming from the investors.
To attract more foreign investment we have no alternative but to be professional in our approach in establishing an investment friendly environment. 
At the very outset the government should take initiative to study our existing potential sectors to know their strength, weaknesses, opportunities and risks. In Bangladesh, Secondly, we should select a few promising sectors for a certain period to develop by ensuring all sorts of support under PPP. PPP is a new concept in Bangladesh incorporated in the last budget. Thirdly, there should be proper selection of TNCs and MNCs after analysing their track records.

Preparation of specific projects to seek investment is a very important task of the investment promotion agency. In absence of a credible project it is quite difficult for a foreign firm to identify and invest in a country. The government should prepare specific project proposal by highlighting local demand, available lands, identifying specific region and financial involvement. One stop service centre at BoI is not working till date. So, an effective one stop service centre and dedicated efficient officers in the desks are required. We hope that these initiatives will promote our FDI performance. At the same time we must remember that FDI is not always risk-free. Prior investigation and analysis are required to welcome FDI inflow for the real economic development of Bangladesh.

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Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

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